Medtronic 2015 Annual Report Download - page 66

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In fiscal year 2014, interest expense, net was $108 million, as compared to $151 million in fiscal year 2013. In fiscal year 2014,
the decrease in interest expense, net was the result of decreased interest expense due to reduced amortization of debt discount as
a result of the April 2013 repayment of $2.200 billion of Senior Convertible Notes, partially offset by increased debt. The
decrease in interest expense, net was also due to increased interest income from higher investment balances, as compared to
fiscal year 2013.
See our discussion in the “Liquidity and Capital Resources” section of this management’s discussion and analysis for more
information regarding our investment portfolio.
Income Taxes
Fiscal Year
Percentage Point
Increase (Decrease)
(dollars in millions) 2015 2014 2013 FY15/14 FY14/13
Provision for income taxes $ 811 $ 640 $ 784 N/A N/A
Effective tax rate 23.3% 17.3% 18.4% 6.0 (1.1)
Non-GAAP adjustments (5.1) 1.9 0.6 (7.0) 1.3
Non-GAAP nominal tax rate(1) 18.2% 19.2% 19.0% (1.0) 0.2
(1) Non-GAAP nominal tax rate is defined as the income tax provision as a percentage of income before income taxes,
excluding Non-GAAP Adjustments, as defined in the Executive Summary of this management discussion and analysis.
We believe that the resulting non-GAAP financial measure provides useful information to investors because it excludes
the effect of these discrete items so that investors can compare our recurring results over multiple periods. Investors
should consider this non-GAAP measure in addition to, and not as a substitute for, financial performance measures
prepared in accordance with U.S. GAAP. In addition, this non-GAAP financial measure may not be the same or similar
to measures presented by other companies.
Our effective tax rate from continuing operations of 23.3 percent increased by 6.0 percentage points from fiscal year 2014 to
fiscal year 2015. The increase in our effective tax rate was due to the net tax impact of special (gains) charges, net, restructuring
charges, net, certain litigation charges, net, acquisition-related items, certain tax adjustments, the impact from the acquisition of
Covidien, and the operational tax benefits described below.
Our non-GAAP nominal tax rate for fiscal year 2015 was 18.2 percent compared to 19.2 percent in the prior fiscal year. The
decrease in our non-GAAP nominal tax rate for fiscal year 2015 as compared to the prior fiscal year was primarily due to the
impact of the Covidien acquisition, operational tax benefits, and year-over-year changes in operational results by jurisdiction.
During fiscal year 2015, we recorded $33 million in operational tax benefits. The retroactive renewal and extension of the U.S.
federal research and development tax credit resulted in a $12 million operational tax benefit for fiscal year 2015. In addition, we
recorded a $9 million benefit associated with foreign dividend distributions, and a $12 million net benefit associated with the
resolution of U.S. federal, state, and foreign income tax audits, finalization of certain tax returns, and changes to uncertain tax
position reserves.
The fiscal year 2014 effective tax rate from continuing operations of 17.3 percent decreased by 1.1 percentage points from fiscal
year 2013. The decrease in our effective tax rate was primarily due to the tax impact of special charges, restructuring charges,
net, certain litigation charges, net, acquisition-related items, the certain tax adjustments recorded during fiscal year 2014, and
other factors impacting our non-GAAP nominal tax rate as discussed below.
Our non-GAAP nominal tax rate for fiscal year 2014 was 19.2 percent compared to 19.0 percent in the prior fiscal year. The
increase in our non-GAAP nominal tax rate for fiscal year 2014 as compared to the prior fiscal year was primarily due to the
impact of the extension of the U.S. federal research and development tax credit on January 2, 2013 for calendar years 2012 and
2013 and the expiration of such extension on December 31, 2013, the finalization of certain income tax returns, changes to
uncertain tax position reserves, the restoration of tax basis on certain assets for which depreciation and amortization deductions
were previously limited, the tax impact of foreign dividend distributions, and year-over-year changes in operational results by
jurisdiction.
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